AG Barr defends Britvic merger as profits dip

Soft drinks maker AG Barr insisted its proposed £1.4bn merger with Britvic
would “add up to value” for its shareholders despite suggestions it could be
a “bum deal” for the Scottish company’s investors.

AG Barr approached Britvic about the £1.4bn all-share merger, which would hand the Scottish company's investors 37pc of a combined group.

Britvic’s shares have gained 11pc since the proposed tie-up was announced but growth in AG Barr’s share price has been more muted, at around 8pc.

Mike van Dulken, head of research at Accendo Markets, said in a note that many in the City believe it would be a “bum deal” for AG Barr investors.

Mr White, who will become chief executive of a combined company, said: “There is a strong industrial logic and there’s an opportunity to achieve some syngergistic benefits. All of those things add up to value for shareholders.”

The two companies have until October 3 to reveal their intentions but the market appears divided on which side would benefit the most.

AG Barr, which makes Irn-Bru and Rubicon fruit drinks, saw pre-tax profits slip 8pc to £14.9m in the six months to July despite a 5pc jump in sales to £130m.

It blamed an increase in sugar prices for the decline in profits, plus the wash-out summer, which led to fewer Britons buying its soft drinks in small, more profitable packages to consume outside in the sun.

The group said competition in the soft drinks market had intensified around the Diamond Jubilee and the Olympic Games but it said the biggest change in the market over the last six months had been sparked by competitors increasing sales volumes through promotions such as “buy one get one free”.